Called to Account

Over the past five years, agencies increasingly have left the General Services Administration's Federal Technology Service holding the bag'a very large bag of money.

Since fiscal 2000, agencies have allowed more than $2 billion of unused money to build up in FTS' IT Fund, which for years has let agencies extend the use of funds beyond the fiscal year. Now FTS is trying to figure out how so much money was left unaccounted for, and if agencies can continue using it. Funds for some projects may be expired, leaving agencies scrambling to make up the difference.

Whether the situation resulted from lax interpretation of the rules or illicit behavior by agency or FTS sales and contracting employees, GSA now is more strictly enforcing how customer agencies use the revolving fund. FTS will require departments to do a better job of planning how'and when'they will spend their money, experts said.

'I've been telling people that Aug. 1 is the new Sept. 1,' said Deidre Lee, the Defense Department's director of procurement policy, referring to the extra time it will take to get procurements into the pipeline. 'It is not as simple as it used to be, nor should it be. We will ask them what the acquisition strategy is, and all those questions that ensure good business decisions.'

DOD accounts for as much as 80 percent FTS's business and has more than $1.4 billion of unused money in the IT Fund. The fund could be merged with the General Supply Fund to create an Acquisition Services Fund under GSA reorganization legislation passed by the House last month. But it's not likely the legislation will become law before Sept. 30, because it does not have a Senate sponsor. The Brooks Act of 1965 created the IT Fund, and the 1996 Clinger-Cohen Act extended it. Under the rules set up by the two laws, agencies can put money into the fund if they have a bona-fide need.

The fund consists of obligated but unspent money that agencies sign over to GSA along with a plan on how they will spend the money. FTS manages the fund and buys IT products and services at the agencies' behest.The payoff for GSA, experts say, is the 2 percent to 4 percent fee FTS charges for its services.

'Parking' money

Most of the money does get used'21 agencies spent $8.7billion in fiscal 2003'but a large cache of unused funds has built up throughthe years.

Especially during the past decade, as buying IT became bigbusiness, GSA officials promoted the ability of agencies to 'park' money inthe IT Fund to extend its life beyond the end of the fiscal year, GSA and otheragency procurement officials say. Depending on the strings Congress attaches tothe dollars, agencies typically have to spend their appropriated funds beforeOct. 1'the beginning of the fiscal year.

GSA has since quashed the promoting of and the actual'parking' or 'banking' of money by agencies in FTS' IT Fund'severelylimiting a well-liked and often-used benefit of FTS.

Part of its appeal was where the fund went awry: Agenciescould park money in the IT Fund when they did not have'and GSA did not enforcethe need for'a well-defined plan on how to use the money.

'There may have been a misinterpretation of how the ITFund worked,' said Kathleen Turco, GSA's chief financial officer, who isleading the effort to improve how the fund works. 'Through the Get It Rightprogram, we are ensuring the financial policies and procedures are clear as theyneed to be for all contracting folks.'

This misinterpretation resulted in money building up overthe years, and now GSA is telling agencies to identify how they plan to use themoney. For instance, agencies could continue to use the funds for an ongoingcontract that cannot be stopped, such as for software development. But otherfunds will have to be returned to the Treasury Department because theirauthorizations have expired or they are not for ongoing work, Turco said.

'We were not as vigilant with the closeout of contractsas we should have been,' Turco said, referring to GSA's obligation to returnunspent money to agencies. 'We are making the adjustments and taking unfilledcustomer orders off our books so the agencies can de-obligate funding.'

While GSA is moving to clear the backlog of unused funds,officials also are developing policy letters on how the IT Fund should be usedthis year and on when FTS will no longer accept new work, in order to make sureall the orders get obligated before Oct. 1, said an agency official whorequested anonymity.

'We will not take work from customer agencies that wecannot execute in a reasonable time frame,' the official said. 'How long isreasonable? I'm not sure. But five years is not reasonable, we all can agreeon that.'

This policy follows a series of other policy announcementsfrom GSA last summer and fall, detailing how the fund would work this year.

Current and former GSA officials, both on and off therecord, maintain that employees who were promoting the ability to park money inthe fund did not understand the intent of the rules.

But others called some of the employees' acts borderlineillegal.

'Parking and dumping where an agency has a need for $1million worth of IT, but puts in the account $3 million or $5 million'that isillegal,' said Steven Tomanelli, a procurement lawyer who travels the countryconsulting and training GSA and other agency civilian acquisition workers.'The IT Fund is a well-conceived idea, but there [have] been someviolations.'

The question of legality comes into play when agencies askFTS contracting employees to spend funds left over from an initial purchase onnew projects.

Reprogram funds

Tomanelli and others say spending extra money goes againstappropriations law and possibly the Anti-Deficiency Act, which basically saysagencies are not to spend money they don't have.

'Trying to hide dollars from the Hill is what the IT Fundlends itself to,' said William Shook, a partner with Preston, Gates and Ellis LLP, a Washington

law firm. 'Agencies should just ask Congress to reprogram funds.'

Tomanelli and other experts point to FTS' culture ofcourting business from other agencies and its bonus structure, under which GSArewards employees with cash bonuses for sales. 'There was a large amount ofblind acceptance by GSA buyers,' he said.

One former GSA official who requested anonymity said theagency is not trying to figure out who was right or wrong, but wants to goforward with a clear definition of how to use the IT Fund.

'There is a lot of controversy to whether the belief ofparking money was wrong from the beginning, or whether times have justchanged,' the former official said.

Alan Chvotkin, senior vice president and general counselfor the Professional Services Council, an Arlington, Va.

, trade association, said his members are concerned about possible task ordersthat will be cancelled for lack of funds.

But Jeffrey Westerhoff, senior vice president ofgovernmentwide acquisition contracts for SRA International Inc. of Fairfax, Va.

, and chairman of the GSA subcommittee for the Information TechnologyAssociation of America, an Arlington, Va.

, trade association, said agencies will find money to pay for projects that maybe affected by FTS' actions.

Meanwhile, agencies also have to be aware of the extraplanning they will have to do.

'We need to do the follow-through and make sure this isnot a recurring issue,' Lee said. 'We are asking program managers to answersome simple questions before sending money over to GSA.'

'We were not as vigilant with the closeout of contracts as we should have been,' Turco said, referring to GSA's obligation to return unspent money to agencies. 'We are making the adjustments and taking unfilled customer orders off our books so the agencies can de-obligate funding.'

While GSA is moving to clear the backlog of unused funds, officials also are developing policy letters on how the IT Fund should be used this year and on when FTS will no longer accept new work, in order to make sure all the orders get obligated before Oct. 1, said an agency official who requested anonymity.

'We will not take work from customer agencies that we cannot execute in a reasonable time frame,' the official said. 'How long is reasonable? I'm not sure. But five years is not reasonable, we all can agree on that.'

This policy follows a series of other policy announcements from GSA last summer and fall, detailing how the fund would work this year.

Current and former GSA officials, both on and off the record, maintain that employees who were promoting the ability to park money in the fund did not understand the intent of the rules.But others called some of the employees' acts borderline illegal.

'Parking and dumping where an agency has a need for $1 million worth of IT, but puts in the account $3 million or $5 million'that is illegal,' said Steven Tomanelli, a procurement lawyer who travels the country consulting and training GSA and other agency civilian acquisition workers. 'The IT Fund is a well-conceived idea, but there [have] been some violations.'The question of legality comes into play when agencies ask FTS contracting employees to spend funds left over from an initial purchase on new projects.

Reprogram funds

Tomanelli and others say spending extra money goes against appropriations law and possibly the Anti-Deficiency Act, which basically says agencies are not to spend money they don't have.'Trying to hide dollars from the Hill is what the IT Fund lends itself to,' said William Shook, a partner with Preston, Gates and Ellis LLP, a Washington law firm. 'Agencies should just ask Congress to reprogram funds.'

Tomanelli and other experts point to FTS' culture of courting business from other agencies and its bonus structure, under which GSA rewards employees with cash bonuses for sales. 'There was a large amount of blind acceptance by GSA buyers,' he said.One former GSA official who requested anonymity said the agency is not trying to figure out who was right or wrong, but wants to go forward with a clear definition of how to use the IT Fund.'There is a lot of controversy to whether the belief of parking money was wrong from the beginning, or whether times have just changed,' the former official said.Alan Chvotkin, senior vice president and general counsel for the Professional Services Council, an Arlington, Va., trade association, said his members are concerned about possible task orders that will be cancelled for lack of funds.

But Jeffrey Westerhoff, senior vice president of governmentwide acquisition contracts for SRA International Inc. of Fairfax, Va., and chairman of the GSA subcommittee for the Information Technology Association of America, an Arlington, Va., trade association, said agencies will find money to pay for projects that may be affected by FTS' actions.

Meanwhile, agencies also have to be aware of the extra planning they will have to do.'We need to do the follow-through and make sure this is not a recurring issue,' Lee said. 'We are asking program managers to answer some simple questions before sending money over to GSA.'